Indian IT firms may pay $250 mn more annually.
Indian information technology (IT) firms are expected to shell out almost double the money — around $4,300 compared to $2,300 — for visa applications for their employees. This follows the US Senate’s decision to increase the application fee for H-1B and L-1 visas by $2,000, while approving the Border Security Bill today.
While the full details of implementation are not available, Nasscom estimates that Indian firms would end up paying $200-250 million more annually on visa costs alone, which will affect their profit margins. The last time the US government had announced an increase in the visa fee was in 2007.
Indian IT services companies expect the impact of the visa application fee rise, to be visible in the first quarter of the next financial year, as this is the time when most Indian IT services companies apply for fresh H-1B visas. Infosys, for instance, has invested about $16 million towards H-1B visa applications during the first quarter of the current financial year.
The IT index on the Bombay Stock Exchange was down 0.50 per cent. Shares of Tata Consultancy Services (TCS) closed at Rs 865.75, down 1.29 per cent. Infosys Technologies' share price was down marginally by 0.33 per cent and closed at Rs 2,864, whereas Wipro's stock was up 0.63 per cent at Rs 433.7.
Border Security Bill
The Border Security Bill aims to increase funding for US border security by approximately $600 million and this is being done by increasing fees for every H-1B or L-1 visa application by an employer that employs 50 or more employees in the US, if more than 50 per cent of the applicant’s employees are under H-1B or L-1 status. The step is being seen as indirect protectionism and contrary to the Obama administration’s repeated pleas to the international community to avoid taking such actions.
“We believe this will have a negative impact on Indian companies investing in the US, employing US talent, driving US technological talent and are overall aiding the US economic recovery,” said Nasscom President Som Mittal.
The US government expects that the money accrued with the increase in visa application fee will be used in providing improved security along the Mexican border. It's only very recently that US President Barack Obama had made a statement saying his efforts on “keeping jobs away from India and China helped the US recovery”.
The increase in the visa application fee will be applicable for those firms who do not have more than 50 per cent of their total workforce in the US as local people (Americans). Going by this, the new initiative is expected to affect almost every Indian IT outsourcing services provider as none of them meet this criterion.
“There was an announcement for a routine increase in the H-1B visa. The US Citizenship and Immigration Services (USCIS) had notified about this in June this year. Post that, there was a window of one month for public debate and it was to be applicable from the fall of 2010 (August),” says Poorvi Chothani, attorney (USA), advocate (India), LawQuest.
“To some extent, it (the decision to increase the visa application costs) is discretionary. While everybody is talking about globalisation and openness in trade relationships, this decision will obviously create an indirect trade barrier,” said V Balakrishnan, chief financial officer of Infosys Technologies, India's second largest IT exporter.
“The visa filing time is over. This increase will impact all the new visas and those that are coming up for renewal. There will be some impact of this increase but as of now it will be difficult to quantify the exact number,” added Mohandas Pai, director-human resources, Infosys Technologies. The company has already invested $16 million as visa fee for this financial year.
What the Border Security Bill means for Indian IT industry
# Profit margins of Indian IT firms, who send thousands of employees to the US on H1-B visa, to be impacted
# Premium processing fees to increase to $1,250 from $1,000
# The H1B visa petition fee to increase from $300 to $325 per person
In the wake of global economic downturn, most Indian IT firms were quite cautious while applying for fresh visa applications due to the fall in demand. However with the spike in the demand environment, companies have again started applying for new H-1B visas. However, the H-1B visa quota of 60,000, as stipulated by the US government in a year, is yet to be fully exhausted.
Corroborating this, industry body Nasscom stated: “We would like to reiterate that Indian companies only take a fraction (under 12 per cent) of the total
H-1B visas, and US companies, who also use these visas in large numbers, will remain unaffected by this Bill, thus unfairly reducing the competitiveness of Indian firms. Provisions like these are also contrary to the spirit and provisions in the World Trade Organisation and the General Agreement on Trade in Services. We are working with various agencies of the government of India to take up this matter suitably with the US administration and we hope that the US would take necessary steps to enable a positive environment for international trade.”
“While we understand the need for the US to protect its southwest borders, it seems that the funding proposed by this Bill would be from the Indian IT sector. In addition to this, in absence of a totalisation agreement, Indian firms and Indian citizens pay in excess of $1 billion to the US in form of social security, with no benefit or refund,” said a Nasscom statement.